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State of Wisconsin |
Release 24-02 |
If an unallowable divestment occurs, the institutionalized person is ineligible for Medicaid coverage of long-term care services for a time period known as the penalty period.
The length of the penalty period is based on the value of the divestment. Once the penalty period starts, it runs uninterrupted until it expires, even if the person is no longer in a long-term care facility or "otherwise eligible" for long-term care Medicaid. If an undue hardship waiver is requested and granted, then the penalty period will be waived per 22.4 Undue Hardship.
Penalty periods only impact someone’s eligibility for LTC services and do not affect an applicant or member’s eligibility for Medicaid card services (21.4.1.1 Medicaid Card Services) when they are residing in a medical institution. An individual ineligible for Community Waivers programs due to a divestment may still be eligible for other types of Medicaid that do not cover long-term care services.
During the penalty period, Medicaid doesn’t pay the institutionalized person's daily care rate in the nursing home, although they are still eligible for Medicaid card services (see 21.4.1.1 Medicaid Card Services).
| Example 1: | Martha resides in a nursing home and applies for institutional Medicaid. Martha is ineligible for Medicaid to pay for her long-term care services in the nursing home for five months due to a divestment. She is eligible for institutional Medicaid, but Medicaid will only pay for her card services during the five-month penalty period. Once the penalty period is over, Martha’s institutional Medicaid will pay for her long-term care services. |
A person is not eligible to enroll in Community Waivers programs during a divestment penalty period. However, a person who is ineligible for Community Waivers programs due to a divestment penalty may be eligible for other programs during the penalty period. They cannot be eligible for Waivers Medicaid or Institutional Medicaid, but they can become eligible for a form of Medicaid not based on receipt of long-term care services, such as SSI-related Medicaid or MAPP, if they meet the eligibility requirements for that program.
| Example 2: | Joe applies for Community Waivers programs through Waivers Medicaid and is determined ineligible for nine months due to a divestment. The IM agency determines that Joe can become eligible for SSI-Related Medicaid by meeting a deductible. Even if Joe meets the deductible and becomes eligible for Medicaid, he may not enroll in any Community Waivers programs until his nine-month divestment penalty period ends. |
The divestment penalty period is calculated in days by dividing the divested amount by the average daily nursing home private pay rate in effect at the time of the application (see Section 39.4.6 Institutional Cost of Care Values). This rate is updated annually on January 1.
| Example 3: | Jeff moved to a nursing home and applied for Medicaid on February 1, 2024. One month earlier, Jeff transferred $18,500 in cash to his son, and it is determined to be a divestment that is not allowed resulting in a penalty period. At the time of application, Jeff is otherwise eligible for LTC Medicaid. Since $18,500 divided by the average daily nursing home private pay rate at the time Jeff applied ($315.61) equals 58.62 days, Jeff will have a divestment penalty period of 58 days. |
For divestments that occur after long term care eligibility is established or subsequent divestments that occur when a person is already in a divestment penalty period, the additional penalty period is calculated using the average daily nursing home private pay rate in effect at the time the divestment penalty period is being determined (see Section 17.3.6 Divestments During a Penalty Period).
Multiple divestments that occur during the look back period must be calculated by adding the individual divestment amounts together to get the total divestment amount. The total is used to calculate the divestment penalty period.
To cure multiple divestments that occurred during the look back period, the applicant must receive the full amount of the total divestment that occurred during the look back period.
Multiple divestments that occur while the member is eligible for Medicaid are considered separate divestments unless they occur in the same month.
Multiple divestments that occur in the same month while the member is eligible for Medicaid are added together to calculate the total amount.
The penalty period for an applicant begins on the date that meets all of the following:
An enrollment date is not required for Community Waivers programs applicants to meet the criteria.
| Note: | An applicant who divests excess assets during the application period, including any backdated months, is ineligible due to excess assets until the month that they divested the assets. The divestment penalty period as well as the potential eligibility for card services begins on the date of the divestment. |
| Example 4: | Jeff requested enrollment in Family Care and was determined functionally eligible on March 1. He applied for Waiver Medicaid on March 5. One month earlier, Jeff had transferred $18,500 in cash to his son, which is a divestment. At the time of application, Jeff is otherwise eligible for Waiver Medicaid. Jeff’s penalty period begins on March 5, the date by which he requested Family Care, met the functional screen criteria, and applied for Waiver Medicaid. |
| Example 5: | Joan entered a nursing home on March 1 and applied for Medicaid on March 4. On her application, Joan reported that, in the previous month, she gave her adult daughter a $100,000 cash gift, which is a divestment. All requested verification is received on March 27, and Joan meets all other Medicaid eligibility requirements. Joan’s divestment penalty period begins on March 1. |
| Example 6: | John applied for a Community Waivers program on April 7. He indicated on his application that he gave his adult son a $60,000 cash gift three months earlier, which is a divestment. As of April 7, John meets the community waiver functional screen criteria and all other Medicaid eligibility requirements. He doesn’t have an enrollment date at this time. John’s penalty period begins on April 7. |
| Example 7: | Jeff entered a nursing home on March 1. He applied for Medicaid on April 15 and requested that his eligibility be backdated to March 1. John meets all other Medicaid eligibility requirements in March and April. However, he reported transferring $100,000 in stocks and bonds to his brother in February, which is a divestment. John’s divestment penalty period begins on March 1, which is the date he was institutionalized, applied for Medicaid LTC, and was otherwise eligible for Medicaid except for the imposition of the divestment penalty. |
| Example 8: | Sam entered a nursing home on October 1. He applied for Medicaid on January 3 and requested that his eligibility be backdated to October 1. He reported giving away an inheritance on November 23 which is a divestment. All necessary verification is received on January 17. Sam is denied Medicaid for being over assets in October and approved and eligible as of November 1. Sam’s divestment penalty period would begin on November 23, which is the date that he was institutionalized, applied for Medicaid, and was otherwise eligible for Medicaid except for the imposition of the divestment penalty. Sam will receive Medicaid card services during his penalty period. |
An enrolled member's penalty period begins on the first of the month after they are given timely notice (see Section 23.1.4 Timely Notice of Adverse Action).
| Example 9: | Joe was determined eligible for institutional Medicaid effective March 1. On July 2, he sold his home and gave the proceeds to his son. Joe reported the divestment on July 12. The worker entered the divestment in CARES on July 16, which impacted Joe’s institutional Medicaid effective August 1. The penalty period begins August 1, the date the worker was able to give timely notice of the penalty period. If the worker had not entered the divestment in CARES until after adverse action in July, the penalty period begin date would be September 1, the first day his LTC services could be impacted with timely notice. Joe will receive only Medicaid card services during the divestment penalty period. |
Curing a divestment penalty period occurs when the entire divested resource or equivalent value is returned to the individual. The individual’s eligibility for LTC services must be redetermined back to the start date of the previously imposed penalty period. If they met all other eligibility requirements during the retroactive period, the individual must be certified for Medicaid-covered LTC services. The returned assets are counted as available assets at the beginning of the month they were returned.
| Example 10: |
Scott gave a CD to his adult son on March 10. On October 1, Scott entered a nursing home and applied for Medicaid. Based on the value of the CD that he divested to his son, Scott was ineligible for Medicaid coverage of the cost of his institutional care for 38 days. The divestment penalty period started on October 1 and ended on November 7. Scott was certified for institutional Medicaid on November 8. Scott’s son had already cashed in the CD, but, on December 5, he returned the entire value in cash to Scott. Since the equivalent value of Scott’s previously transferred asset was returned, Scott is now potentially eligible for institutional Medicaid services for the period of October 1 through November 7. Scott met all other eligibility requirements during that retroactive period, and he is certified for institutional Medicaid services for that same period. The cash that Scott received from his son and reported on December 5 is counted as an asset beginning in December. Because the value of the cash exceeds the program asset limit, it would make him ineligible for Medicaid, effective January 1, unless his assets are reduced to meet the asset limit prior to January 1. |
An applicant or member can cure their divestment period penalty that resulted from multiple divestments during the look back period by showing that all the assets divested during the look back period, or amounts equal to their value, have been returned.
After eligibility is established, a member can cure their unallowable divestments that occurred in the same month by receiving the full amount of the divestments.
The total value of the divested amount must be given to the institutionalized person to cure the divestment. A penalty period is not recalculated based on a partial repayment.
| Example 11: | Jerry divested cash to his daughter prior to applying for institutional Medicaid. He has a 373-day penalty period. His daughter returned half of the divested amount. Jerry’s penalty period remains 373 days. If Jerry’s daughter returned the entire amount, the divestment would be cured, and Jerry would no longer have a penalty period. |
Divestments that occur during the penalty period incur an additional penalty period. This calculation is based on the average daily nursing home private pay rate in effect when the additional divestment penalty period is determined. The new penalty period doesn’t begin until the existing period(s) expires. The penalty periods cannot run concurrently.
| Example 12: | Jeff has a penalty period that lasts until July 25. In May, he transferred a large amount of cash to friends. Based on the value of this divestment and the average daily nursing home private pay rate currently in effect, Jeff’s additional divestment penalty period is 154 days. The new divestment period of 154 days begins July 26, the day after the original divestment penalty period has ended. |
There are circumstances that require updates to existing penalty periods. These include shortening a penalty period based on a fair hearing decision, curing divestment penalty periods, and other changes. See Process Help, Section 11.6.6 Changing Divestment Periods after Confirmation for information about changing divestment penalty periods.
If the community spouse makes a divestment resulting in a penalty period for the institutionalized person (17.2.7.7 Community Spouse Divestment that Impacts the Institutionalized Person), split the remaining penalty period between the spouses at the time the community spouse enters an institution, applies for Medicaid, and is found otherwise eligible.
| Example 13: | Joe is in a nursing home. Joe's wife, Mildred, is his community spouse. Joe inherited $84,000 and immediately transferred it to Mildred. Mildred gave it to her church. This divestment resulted in a penalty period for Joe. Now Mildred is entering the nursing home and applying for Medicaid. The time that remains on Joe's penalty period must be divided between the spouses. |
The penalty period must be determined as follows:
Refer to Process Help, Section 11.6.6.5 Spousal Split.
If either spouse leaves the institution or dies, add the remainder of his or her penalty period to the other spouse's penalty period.
This page last updated in Release Number: 24-01
Release Date: 04/03/2024
Effective Date: 01/01/2024
The information concerning the Medicaid program provided in this handbook release is published in accordance with: Titles XI and XIX of the Social Security Act; Parts 430 through 481 of Title 42 of the Code of Federal Regulations; Chapters 46 and 49 of the Wisconsin Statutes; and Chapters HA 3, DHS 2, 10 and 101 through 109 of the Wisconsin Administrative Code.
Notice: The content within this manual is the sole responsibility of the State of Wisconsin's Department of Health Services (DHS). This site will link to sites outside of DHS where appropriate. DHS is in no way responsible for the content of sites outside of DHS.
Publication Number: P-10030